Why America’s inequality conversation is such a farce

Tuesday, Mar 31, 2015
“It’s your own damn fault!” The upcoming campaign is supposedly going to be about inequality. Here's why it's just another plutocratic charade
Elias Isquith

As I’ve noted previously, one of the stranger recent developments in American politics has been the swift arrival of a bipartisan consensus over economic inequality. For years and years — decades, even — the left and the right have quarreled over inequality’s very existence. But now, worrying about the maldistribution of income and wealth in the U.S. is utterly mainstream. Noting the widening chasm between the 1 percent and everyone else has become so anodyne, in fact, that even would-be presidents like Hillary Clinton, Jeb Bush, Ted Cruz, Rand Paul and Marco Rubio are doing it. It’s enough to make a longtime class-warrior think she’s winning.

That would be a mistake. Because although the political value of inequality is different today than was the case before the Great Recession, it’s mainly been rhetoric — and not policy — that has changed. We may talk more than we once did about the rich are, as Fitzgerald wrote, “not like you and me.” So far, very little’s been done on the national level to explicitly confront the problem. On the contrary, the economic recovery has been so full of McJobs that there’s reason to suspect the issue may only get worse in years to come.

But if the U.S. economy is just as iniquitous as ever, and if the near-total gutting of campaign finance regulation has made the U.S. political economy almost as plutocratic as ever, then how do we explain the rise of inequality as a mainstream topic of conversation? If the 1 and .01 percent still wields such a massively disproportionate degree of influence over our culture as well as our politics, wouldn’t talk of class remain verboten? Shouldn’t the super-rich be telling voters and the public in general to pay no attention to the moneybags behind the curtain?

You might think so; but that would only be true if the wealthy’s control of American politics was more direct (and ham-handed) than it actually is. As Noam Chomsky has argued, the way the wealthy and the powerful operate in a formal democracy is significantly different from how they act in an illiberal society. The discourse has its regulators and gate-keepers, of course. But rather than outright censorship, the powers-that-be in the U.S. tend to head-off opposition by setting the parameters of the debate — and doing so in such a way as to ensure their interests are never really threatened.

Noam Scheiber’s New York Times piece on Monday shows us what that process looks like in the real world. What we see in his report is a donor class that’s acquiesced to inequality being a major 2016 issue, partially because they’ve succeeded so far in rendering any serious responses to the problem out of the question. As Scheiber notes, strong majorities of Americans — including Republicans— are in favor of the government taking action to address the crisis, with redistribution from the 1 percent to the rest being an especially popular response. Yet for all their talk of inequality and opportunity, none of the declared or soon-to-declare presidential candidates of consequence have provided even a general endorsement of such a plan.

Unsurprisingly, their hesitation is shared by one significant group — donors. Citing the invaluable work of Benjamin Page, Jason Seawright and Larry Bartels, Scheiber notes that although a majority of the wealthy Chicago-area persons these researchers interviewed professed concern over inequality, too, they were dramatically less interested in any public policy solutions. “Only 13 percent of wealthy interview subjects” want to see government work to address the problem, Scheiber writes. And only 17 percent are supportive of policies that involve raising taxes on the rich.

And it’s not just tax hikes that the wealthy are keeping off the table. While two-out-of-three Americans think the government should help citizens find a job, provided they’re willing and able, fewer than one-out-of-five of wealthy respondents agree. “Forty percent of the wealthy,” Scheiber writes, want the minimum wage to be high enough to support a family; among the general public, support for that idea nearly doubles, coming out at 78 percent. Perhaps even more telling, though, is the way the overall philosophy of the very rich permeates the public discourse at large.

For example: According to interviews with the wealthy conducted by Fiona Chin, a Northwestern graduate student whom Scheiber describes as a Page “protégé,” the 1 percent is much more likely to believe that inequality is a byproduct of virtue and hard work, rather than any flaws in the U.S.’s economic system. The wealthy, Chin says, think inequality is “a story about individual hard work, effort and character.” Sure, the rich have some built-in advantages, they say. But they’re disadvantaged too; being born with means, after all, can make you less inclined to work.

If you didn’t strike it rich in America, these 1 percenters told Chin, it’s most likely because you “didn’t take advantage of the education system.” That, of course, is a euphemistic way of saying it’s your own damn fault. And while Scheiber’s report doesn’t bring up this angle directly, it’s not hard to see how there might be a connection between the 1 percent’s focus on education and the burgeoning movement to “reform” public schooling. A grand experiment in charter schools is fine. But reducing inequality by giving money to the people who need it? Not okay.

So we may now hear Bush — or Cruz, or Rubio, or Paul — talk about “opportunity” gaps; and we may soon listen as Clinton rails against cutting hedge fund managers’ taxes. But given the constraints the 1 percent establishes upfront, you can expect that most of the ideas to come from Bush, Rubio and, eventually, Clinton will differ little from what they would’ve proposed in the years before the Great Recession. And until they stop trying to sell the same-old policies under an inequality-themed banner, the politics of the issue will not be appreciably different. We’ll merely have transitioned from denial to a charade.

Low-wage jobs drive the recovery

By Ned Resnikoff -msnbc

It’s not uncommon to hear economics writers dismiss post-recession job growth as evidence of a “McJobs Recovery.” Sure, jobs may be slowly coming back, the argument goes, but not good jobs. Instead, employment growth seems to be largely concentrated in the sectors of the economy where wages are lowest.

That argument received some empirical ballast with the release of a report from the National Employment Law Project (NELP) that finds low-wage industries have grown at a disproportionately high rate since the end of the recession. The report’s author, policy analyst Michael Evangelist, finds that 44% of job growth since the end of the recession has been concentrated in industries where the median wage is $13.33 or less. That includes food service, retail, and administrative services (which includes jobs like security, maintenance, and janitorial work).

This is only the most recent in a series of NELP reports on the McJobs Recovery, all of which have found similar results. Evangelist told msnbc the consistency suggests this might be more than a hiccup on the road back to relative prosperity.

“Early on when we were doing these reports, we just speculated cyclical factors,” he said. “So one year into the recovery, consumer demand was growing and you’d see more growth in the restaurant food service industry.” But as food service continued to grow at a disproportionately high rate, NELP analysts came to see unbalanced growth as a more stable feature of the economic landscape.

“Now we’re five years into this and these are still the industries that are growing quickly,” said Evangelist.

Food service isn’t just one of the economy’s most fecund sectors: It’s also its most unequal, according to another report released last week by the left-leaning think tank Demos. In that study, Demos policy analyst Catherine Ruetschlin found that food services and retail had bigger worker-to-CEO compensation gaps than any other sector of the economy.

The steady encroachment of low-wage jobs may help to explain why median income in the United States has begun to stagnate even as the wealth of the country’s economic elite soars into previously unexplored altitudes. Last week, The New York Times reported that America no longer leads the world in median wealth, having been surpassed by Canada for the first time in at least decades.

Arizona enacts law requiring doctors to tell patients abortions can be reversed

Tuesday, Mar 31, 2015
The law also limits public insurance coverage for abortion 
Jenny Kutner

Arizona Gov. Doug Ducey on Monday signed a controversial bill to require doctors to tell women who undergo medication abortion that the procedure can be reversed, despite no medical or scientific evidence to substantiate the claim. The law also bans abortion coverage for insurance purchased through the Affordable Care Act, except in cases of rape or incest.

“The American people overwhelmingly oppose taxpayer funding of abortions, and it’s no different in Arizona, where we have long-standing policy against subsidizing them with public dollars,” Ducey said in a statement.

Arizona is already one of several states that requires doctors to acquire admitting privileges at a hospital within 30 miles of the clinics where they perform abortions. The new law, however, also dictates how physicians interact with patients, and was criticized by just one Republican for requiring that doctors indicate to women that medication abortion is reversible. Reproductive rights advocates have also challenged that provision of the law, calling it infantilizing.

“It is just insulting to her intelligence to imply that she isn’t capable of making a decision and following through with that decision,” NARAL Arizona board member Gabrielle Goodrick told RH Reality Check. “We trust women can make their decisions as consenting adults.”

“A malign force in American history”: Why you should be terrified of the Supreme Court

Monday, Mar 30, 2015

Ridiculous theories, destructive effects and evil tragedies are SCOTUS trademarks, expert Ian Millhiser tells Salon 

Elias Isquith

Throughout his years as a national politician and in the White House, President Barack Obama has had many antagonists and foes: John McCain, Mitch McConnell, Mitt Romney, Eric Cantor and John Boehner come to mind. But despite their greater public profile, one could argue that none of these men have been quite as formidable a source of opposition and frustration as the five conservative justices on the Supreme Court.

Indeed, the closest Obama’s signature achievement, the Affordable Care Act, ever came to destruction was not in the House or in the Senate. It was behind the closed doors of the justices’ chambers, where it survived in 2012 by just one vote, and where, due to King v. Burwell, the latest case against Obamacare, it finds itself imperiled once again. The greatest threat to the Obama agenda, in other words, has manifested in the form of a purposefully opaque institution, and in the persons of five unelected conservative men.

Unsurprisingly, this state of affairs has led many a liberal or even moderate Democrat to pull their hair and grind their teeth out of aggravation. And when compared to the Supreme Court of the 1950s, 1960s and early 1970s, which most progressives think of as a source of comfort and power for society’s downtrodden, the Roberts court looks anomalous indeed. But what if it’s the mid-20th century court, and not that of today, which stands as the exception to the rule? What if the Roberts court is more in keeping with U.S. history than liberals tend to think?

That’s the argument that Ian Millhiser, a senior fellow at the Center for American Progress Action Fund and the editor of Think Progress Justice, makes in his new book, “Injustices: The Supreme Court’s History of Comforting the Comfortable and Afflicting the Afflicted.” As Millhiser sees it, the Supreme Court has spent most of its existence standing athwart history, yelling, Stop! From gutting the civil rights acts of the post-Civil War era to attacking business regulations to weakening protections for children, minorities and immigrants, the court Millhiser describes has much more often than not worked to return power to those in society who need it least, and abuse it most.

Recently, Salon spoke over the phone with Millhiser to discuss his new book as well as his thoughts on the Obamacare case currently in front of the court, the legitimacy of the institution, and why the next presidential election will have such a large impact on whether the court of the foreseeable future is one that fights progress, or acts as its shepherd. Our conversation is below and has been edited for clarity and length.

The Supreme Court has been a source of controversy for a long, long time. But what was it in particular that you wanted to get across with this book?

The notion that the Supreme Court has been a malign force in American history is by no means a new one. It dominated President [Franklin Delano] Roosevelt’s rhetoric on the Supreme Court; it was the reason why many of the liberal justices on the Supreme Court were reluctant to to vote the right way on Brown v. Board of Education, because they were so fearful of judicial power that they were afraid to exercise it. It’s only fairly recently that liberals have come to think of the Supreme Court as something we shouldn’t view with extraordinary trepidation.

I wrote this book in large part because I think people — and not just liberals, not just people who think we should have things like child labor laws and Medicare — have lost an important understanding of our history. Meanwhile, people who want to dismantle a lot of the progress of the 20th century are busy building an alternative mythology about the Supreme Court that is very harmful and that we have not yet been effective in countering.

You mentioned how conservatives like to claim or imply that the Constitution prescribes a libertarian government. Why is that narrative mistaken?

The conservative mythology I keep referring to is basically a mythology of original sin. Their narrative is that government is something that the Constitution was very skeptical of and everyone understood this until Franklin Delano Roosevelt came along and tried to pack the court with up to 15 Justices in order to break the back of this understanding of the Constitution. That moment where the court gave in and allowed the New Deal to exist, that is the original sin in the conservative narrative.

The reality could not be more different. The reality is that George Washington, in the midst of the Revolutionary War, was tossing off angry letters saying that Congress didn’t have enough power to act and he wasn’t going to win this war if they didn’t have a more responsive national government. He and others pushed for a more expansive role of government. At the Constitutional Convention, the framers passed a resolution saying that a national government has to have full powers to do everything that the states are not competent enough to do on their own — and one thing the states aren’t capable of doing on their own is regulating a national economy.

Let’s move away from history for a moment to talk about the present court. Granting that the court, historically, has much more often been an enemy of progress rather than a friend, where would you rank the current Roberts Court?

I think what the Roberts Court is going to be remembered as is a transitional court. The Roberts Court is really bad; Citizens United is terrible, and striking down the Voting Rights Act is terrible. But compared to what has come from most of the Supreme Court’s history, it’s actually a lot better.

There are two things at play right now that are going to impact the future of the Supreme Court. At the last national conference of the Federalist Society, a very influential conservative legal group, there was a panel on rolling back anti-discrimination laws and repealing the minimum wage. This is the place where lawsuits like attacks on the Affordable Care Act, like Hobby Lobby, etc., are incubated and where conservative lawyers get together and refine their ideas before they get their friends on the Supreme Court to turn them into law.

The Federalist Society, which is going to have a tremendous impact on who the next Republican president nominates for the Supreme Court, is raring for a return to the bad old days, to the era where the Supreme Court viewed its job as engaging in wholesale skepticism of business regulation. If they succeeded in getting the ear of the next president — and they did have the ear of President George W. Bush and previous Republican presidents — we’re going to be in for a wild ride.

Why else do you see this court as being transitional?

The second thing to keep in mind is that there are four justices right now over the age of 76: Justices Scalia, Kennedy, Ginsburg and Breyer are all in their late 70s or early 80s. When the next president is sworn in, there will be three sitting justices in their 80s — assuming none of them leave before then— so there’s a very real chance that the next president of the United States could replace four justices.

There’s already a fifth justice on the Supreme Court, Clarence Thomas, who has said that he agrees with [the pre-New Deal court's worldview] and the legal argument that was used to attack the Civil Rights Act of 1964; so if he got his way, we probably couldn’t have a ban on whites-only water fountains. Right now, the fact that there’s one justice who embraces this radical anti-government vision doesn’t seem all that scary. But if four more get up there, we could be on the bridge to the 19th century right now.

At the same time, if those four justices are replaced by someone who thinks more or less the same way our current president thinks, then we could have, for the first time in my lifetime and for the second time in the Supreme Court’s history, a court that is very much interested in letting individual rights flourish, in letting voting rights flourish, and in allowing our democracy to function without having ideological justices second-guessing the decision that are made by the people and their representatives.

One question that occurs to me now, and which has been in the discourse about the court for the past few years, is the idea of “legitimacy.” If the current court ends up tarnishing the institution’s legitimacy, that might affect how the next court can operate. But legitimacy is pretty vague concept. Do you think it’s real? Or is it one of those messy ideas we use without adequate interrogation?

That’s a very timely question because there’s this King v. Burwell case in front of the Supreme Court seeking to gut the Affordable Care Act. If that case prevails, an estimated 10,000 people are going to die every year who otherwise would have lived. In addition to that, the legal theory they would use to gut Obamacare is not a bit of a joke; it’s a huge joke; it’s a ridiculous theory. People are very much talking right now about this question of whether we even want the Supreme Court to have this kind of power and whether they are truly legitimate if, based on such a ridiculous legal theory, they could produce such an evil result.

How unprecedented is it that people are talking about the court this way?

The one other time when you saw serious talk about that question come up was during the Roosevelt administration, when you had this huge national crisis, the Great Depression, going on. Roosevelt was doing everything he could think of to restore economic order, and the Supreme Court kept striking it down. In the midst of that tragedy, not only were there serious questions about the court’s legitimacy, but Roosevelt went so far as to propose adding Justices to the Court in an effort, basically, to neutralize it.

Do you think that kind of pressure works? That the court is less radical if it feels like it’s being closely observed and will come in for significant criticism if it’s seen as overstepping its bounds?

I do think it’s the case that at least certain members of the court in the past have become reluctant to do things that are both immoral … when they realize that people are looking over their shoulder — and that people are more likely to look over their shoulder when the results they would produce are particularly tragic.

That’s why I want people to be aware of the consequences. I want people to be terrified of the Supreme Court because we’ve seen over and over again throughout history that when they go off the rails, the results are absolutely disastrous for ordinary Americans.

How do you feel about proposals for reforms to the Supreme Court, like changing it so justices don’t serve in perpetuity but have fixed term limits? Do you think that’s a workable solution? Or is it not really adequate to the task?

I don’t think term limits are going to solve the problem, even if we manage to get them through; I think there is sort of a backhanded way to do it without a Constitutional amendment, but it would take a really long time. The fact remains that Justice Scalia is the longest-serving member of the court and he’s pretty terrible; but Justice Alito hasn’t been there very long, relatively speaking, and he’s even worse. I don’t think there’s a correlation between the tenure of the Justice and whether they’re a good or a bad Justice.

One of the main things you focus on in the book is that Supreme Court decisions have real-world consequences for regular people — and they’ve often been bad. What do you think of the argument raised by some, perhaps most prominently Dahlia Lithwick, that the court would be more likely to understand the human stakes if it weren’t comprised of so many law school all-stars, and had more politicians, as used to happen, instead?

I love Dahlia Lithwick; she may be the single best writer in the Supreme Court issues space. I disagree with her on this point, though. The reason why is because the court has almost always been terrible; it was terrible when you had brilliant scholarly and very dastardly men like Stephen Field leading the charge to dismantle the regulatory state, and it’s been really terrible when you had ignorant bigots like James Clark McReynolds.

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Wall Street’s new student loan scheme: Subprime loans are coming to financial aid

Monday, Mar 30, 2015

Slimy new loan options proliferate, as Wall Street looks to do for education what it did to the economy 

Jeff Bryant

Wall Street wants to own your education destiny.

To the old saying about “death and taxes,” you can now add another: debt.

In fact, in contemporary America, debt is likely becoming at least as all-encompassing as the other two.

An increasingly powerful force behind the debt explosion is not what you might expect: not cars, not homes, not healthcare. It’s education.

Since the Great Recession, federal and state authorities have been disinvesting from their obligations to educate the citizenry. So now, nearly every state spends less on higher education than it did in 2007. And most states continue to spend less on K-12 education than they did in 2007. Federal government expenditures on education are also in decline.

So the burden of financing education has increasingly fallen on local governments and individuals, who have responded by borrowing money to pay for schooling.

Education debt is rapidly becoming a cradle to grave omnipresence – from parents taking out kindergarten loans, to taxpayers shouldering the ballooning costs of exotic school bonds, to senior citizens staving off bankruptcies caused by college debts.

With edu-debt levels mounting higher and higher at every turn, cash-strapped parents, municipal governments and education institutions have turned to solutions from Wall Street.

According to at least one investment news source, banks are increasingly reluctant to back infrastructure investments like schools, so the financial industry is rushing in to fill the void. “The severely restricted capacity of banks to provide long-term debt for infrastructure deals comes at a time when the need for infrastructure spending across the globe is soaring,” the report notes. “A great deal of debt will go to the bond markets. But they will not be the full solution by any means.”

Instead, an emerging “private loan space” is introducing “a number of new vehicles.”

An alphabet soup of new financial vehicles – SLABS, CABS, PPPs, ISAs – that’s been created in the edu-debt sphere spells disaster, as Wall Street tightens its control of how – or even whether – the nation educates its future workers and citizens.

Turning Students Into SLABS

A lot has been written about college student loan debt, now nearly $1.2 trillion and counting. But too little attention has focused on Wall Street’s role in the run-up.

Recall, when Wall Street speculators wanted a market for subprime mortgages, they created high-risk derivative securities that bundled the mortgages to sell as investments. The speculators have done the same for student loans.

These student loan asset-backed securities, or SLABS, have a performance history that has “been very good, and investors’ rate of return has been excellent,” according to an article in Wikipedia.

SLABS are “hot,” a Wall Street Journal headline exhorted its readers in 2013. “Investors are flocking to SLABS,” a more recent article on the Huffington Post reports.

A post on the blog for left-leaning advocacy Demos explains, “Before the SLABS binge, most private student loans were actually made in connection with the college financial aid office, which helped ensure students weren’t taken for a ride, or weren’t borrowing more than they needed to. Between 2005 and 2007, the percentage of loans to students made without any school involvement grew from 40 percent to over 70 percent.”

It’s not hard to see the allure of SLABS. Student loans seem to be an endless stream of revenue as colleges and universities continue to increase tuition, economic conditions and employment transience feed the unemployed back into continuing education, and political leaders urge everyone to attend college. The income stream is nearly guaranteed to pay off because the loans are next to impossible to discharge in bankruptcy.

A Huffington Post article by Chris Kirkham states, SLABS offer “seemingly unlimited growth potential at virtually zero risk. The burden of college loan repayment falls entirely on students’ backs, shielding corporations from the consequences of default.”

Indeed, any attempt to write off the massive student debt would not only have to contend with government reluctance to lose such a profitable revenue source, but would also meet deep-pocketed opposition from the financial industry.

But SLABS are only a subset of Wall Street’s continuously expanding man spread in the edu-debt sector.

Selling Schools on CABS And Charters

Much less attention has focused on how government and education institutions are becoming more and more saddled with debt.

According to the website Governing.com, “Many local governments across the U.S. face steep budget deficits as they struggle to pay off debts accumulated over a number of years. As a last resort, some filed for bankruptcy.”

School district bankruptcies are occurring with alarming frequency, USA Today reported last year. “California saw a record number of school districts in fiscal distress in 2012; currently, eight school districts have negative certifications, meaning that based on current projections, the school districts will not meet their financial obligations for fiscal 2014 or 2015. Another 41 school districts may run out of money by fiscal 2016.”

California schools trying to stave off insolvency have increasingly turned to the financial sector for help. Writing at the Web of Debt blog site, Ellen Brown explains how financial brokers have promoted “something called ‘capital appreciation bonds’ (CABs) as a tool. … CABs have now been issued by more than 400 California districts, some with repayment obligations of up to 20 times the principal advanced (or 2,000 percent).”

Adding to the edu-debt burden is the rush to finance charter schools. Recently, the Bloomberg news agency reported, “US charter schools are issuing a record amount of municipal debt … The institutions, privately run with public funding, have sold $1.6 billion of securities in 2014.”

Charter schools are notorious for closing suddenly, often on very short notice, leaving school districts holding the bag for the remaining costs and outstanding debts. Over 65 percent of the time, charter school closures are due to financial problems or “mismanagement,” according to research quoted in the Huffington Post.

A Plague Of PPPs

In higher education, the recent announcement that Sweet Briar College in Virginia would have to close due to financial insolvency stunned current and former students. But Sweet Briar’s imminent demise is likely just the first of many more college financial failures to come, according to a recent Op-Ed by a former Department of Education official Dennis Cariello in The Hill.

Cariello points to a recent study by Bain & Co. that concludes over 60 percent of American colleges and universities are on an “unsustainable financial path” or at financial risk.

To a considerable extent, Sweet Briar was done in by bad loan arrangements made with the private financial sector. As an expert for the Roosevelt Institute explains, “It is closing because it signed some terrible deals to get what must have felt like ‘needed’ money at the time.”

Is Sweet Briar “the canary in the coal mine?” the Roosevelt piece asks, and points to the University of California system, the University of Michigan, and American University that are also examples where “banks are certainly making obscene profits … and passing debt on to students through increased costs.”

A report from Inside Higher Education explains the extent of the financial wheeling-and-dealing in public higher ed. “Burdened by aging campuses, several years of backlogged maintenance projects, increased competition for students (and the tuition revenue that comes with them), and little hope that states are going to fund the construction they need, either through appropriations or by issuing their own debt, public colleges and universities are likely to issue their own debt to finance the renovation of their facilities.”

Among the many options public universities are considering for funding are more “public-private partnerships [PPPs], whereby private developers get the capital to construct facilities and then universities strike long-term leases to occupy the space.”

No doubt, these long-term PPPs present other opportunities for the financial industry to divert public money to private debt holders who can further capitalize on the venture by securitizing the debts, sticking education institutions – and therefore, students and taxpayers – with unsustainable levels of debt.

With SLABS, CABS, PPPs already in the mix, it’s hard to see how the plague of edu-debt schemes could get any worse. But it can.

Investor Impunity Enforced by ISAs

The ultimate solution in the private edu-debt sphere emerged recently when conservative ex-governor of Indiana, now president of Purdue University, Mitch Daniels proposed to the U.S. Congress that, “Instead of taking out a traditional college loan, students would have the option of finding an investor – possibly a Purdue alum – to finance their degree in exchange for a share of their future income.”

Daniels is not the only proponent of these arrangements. According to the reporter, Republican Florida Sen. Marco Rubio and former House Rep. Tom Petri from Wisconsin introduced legislation last year to help create the legal framework for these kinds of schemes. The bills did not advance.

But like what so often happens, quirky proposals from conservatives that appear like blips on the outer edge of the crazy radar, actually have a huge think tank machinery behind them. As a report from an Indiana news outlet explains, the financial vehicles Daniels alluded to are what’s known in the biz as Income Share Arrangements (ISAs). The reporter sourced the concept of ISAs to 1955 and University of Chicago economist Milton Friedman, the god of right-wing privatization advocates.

Beth Akers, a fellow with centrist think tank Brookings, has argued ISAs should “play a role” in financing student loan debt. She posits that the central problem with higher education is there is “almost no incentive” for students to choose schools and courses of study that pay off down the road in terms of lucrative salaries. A broad market for ISAs could change that by enabling students to “collateralize their financing with future earnings, just as home buyers collateralize their mortgage with the house itself.”

“Income share agreements … are quietly gaining a following among critics of the nation’s staggering student-debt problem,” Slate’s Alison Griswold observes. “New companies such as Upstart, Pave, and Lumni have turned to the investing-in-people model.”

Griswold points to a study from the conservative American Enterprise Institute which argues, “Because ISA investors earn a profit only when a student is successful, they offer students better terms for programs that are expected to be of high value and have strong incentives to support students both during school and after graduation. This process gives students strong signals about which programs and fields are most likely to help them be successful.”

It’s not at all hard to imagine what this would lead to – academic programs where students are financially “incentivized” to pursue what investors prefer rather than follow their imaginations and ideas. Even if they do take the incentive route, they run the risk of a lifetime of indentured servitude to their financial backers should the market for their chosen career turn sour after they graduate.

The consequences of such a financial arrangement are harmful to businesses too. Want to be that creative writing major that ends up in the marketing field, or that botany student who pursues food and wine retailing? Forget it. The system run by ISAs will likely never incentivize outliers in our employment system that often end up being the drivers of problem solving and creativity in business.

What’s worse, instead of student debt getting “collateralized,” as the Brookings fellow put it, what really becomes the collateral is not a thing, like a house, but a person: the student herself.

One can easily see how a speculative market where math or science majors are tossed onto the gambling table with students who pursued art or humanities studies would play out, and what could have propelled a student’s choices when they’re still teenagers – a quest for personal development and intrinsic reward – becomes a lifelong liability regardless of personal attributes.

The ramifications of a higher education system financed by these kinds of debt mongers would be catastrophic as it worked into K-12, as it surely would.

Are Children Just Numbers?

When Wall Street influence trickles down to K-12, there’s certainly a market opportunity awaiting.

Advocates in the K-12 arena who insist on running every student through a battery of standardized tests every year have given – either unwittingly or intentionally (does it matter?) – the financial industry a huge gift by decreeing that student scores on standardized tests should define students’ learning “output.” Now, everything monetarily related to a child’s education – operations budgets, teacher salaries, classroom costs, government funds, grant money – can be related to a test score output.

This in effect turns student learning – and by extension, the students themselves – into a commodity that can be speculated on. In a financial environment populated with ISA investors, students then become like pork bellies or yen, and schools get turned into test-preparation factories, ignoring subjects and skills that are not assessed.

That could be what Wall Street wants, an education system focused on spitting out products that fit into pre-conceived business models, while less money goes toward educating those “other kids.” But is that really what the rest of us want?